SEPANG: AirAsia Group Bhd’s move to dispose of its aircraft would be a good way to get rid of residual risk, said group chief executive officer Tan Sri Tony Fernandes.
He said the low-cost carrier was moving to its asset-light business model from the traditional model of owning aircraft as it was more feasible and cheaper in the current volatile market.
“People think that we are an asset-light airline because we are going to become a digital company. That is not the case…we are asset-light only because the market makes it feasible to lease plane. In the current market, it is cheaper to lease plane than to buy plane.
“Now if the interest rate gets cut (which might be), then it will become cheaper to buy plane. So we are only responding to the market situation,” he told reporters after the launch of Malaysia’s first outdoor plane observation deck at the Kuala Lumpur International Airport by Malaysia Airports Holdings Bhd here, today.
Furthermore, Fernandes said AirAsia had made a change in its aircraft orders from CEO (classic engine options) to NEO (new engine options), thus selling its aircraft was a good way of getting rid of residual risk.
“We sold it (aircraft) at a very high price in the market and dividend pay-out to our shareholders, so it was a very neat solution. While we are asset-light now, that does not mean we will be asset-light forever. If interest rate changes, then we will start buying aircraft again.
“But, fundamentally, on the journey to lessen the volatility of our earnings and I hope in the years to come, our digital and ancillary businesses would contribute 70 per cent and 30 per cent of our earnings,” he said.
Describing it as a lofty ambition, Fernandes said it was achievable based on the company’s efforts in the digital world, adding that AirAsia targeted digital business to contribute 70 per cent to its earnings given that the airline was making good progress in its digital segment.
During AirAsia’s conference call with analysts in May, its management said the carrier targets to sell another 19 aircraft this year and AirAsia will own only one aircraft by the end of its aircraft disposal exercise. – Bernama
